The online experiment

The online experiment

In 2009, Webchutney Studio Pvt. Ltd, a Delhi-based digital marketing agency, studied the attitude of marketers, usage and ad spending allocation to digital media compared with traditional media, such as print and television. The study was in collaboration with knowledge partner JuxtConsult Research and Consulting Pvt. Ltd. Digital Media Outlook 2009 showed how the slowdown prompted many advertisers to look at cost-effective advertising, including mobile and online modes.

Digital Media Outlook 2010 continues to track the trend in the online and mobile space as far as ad spending goes. The scope of the study has widened — it covers the top 1,000 marketers, including brand chiefs and marketing and communication heads of various sectors. Last year’s survey had the top 500 advertisers in the space.

“Our primary objective was to study the nature of allocation of ad spends by top marketers across various mediums. In the process, we also analysed the rationale that drives spends towards the online media," said Siddharth Rao, chief executive officer, Webchutney.

The study, conducted between April and July 2010, pegged the overall ad spending of the top 1,000 marketers at 18,950 crore in 2009-10. It also estimated ad spending growth at a compound annual growth rate (CAGR) of 15% from 2008 to 2011. Moreover, the ad spending of the top 1,000 marketers increased 16% in 2009-10 from the previous fiscal.In fact, 14% growth is expected in the 2010-2011, increasing overall ad spending to 21,523 crore.

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Though the online spending share of the top 1,000 advertisers is still quite low at 4% in 2009-10, it marks an increase from 2% in 2008-09. It is estimated that the share of online marketing will grow to 5% in 2010-11.

The report also observes that 2009 was touted as the year of mobile advertising in which the spending share was expected to grow over 600%. Actual growth has been only 45% and is likely to slow to 36% in 2010-2011.

“The scope of marketing in the mobile landscape has been hyped. There’s been too much expectation in too little time," Rao said. “The number of mobile Internet users is too small to spark marketers’ interest in this medium."

The report states that only 25% of marketers say they plan to increase spending on mobile advertising in 2010-11 while 38% want to cut it. While verticals with maximum overall ad spending contribute the least online, it’s marketers with the smaller ad budgets who spend a higher marketing budget online.

Despite challenges, Digital Media Outlook 2010 reports that online ad spending will increase by 45% in the next financial year. Despite a slow start, online advertising continues to gain momentum, thanks to its growing reach and the awareness of consumers.

Growing online medium (Graphic)

Though online spend share of the top 1,000 advertisers remains low at 4% in fiscal 2010, it’s still a jump from 2% in fiscal 2009. Online advertising share will continue to grow albeit slowly and is expected to touch 5% in fiscal 2011. Ad spend share will continue to be dominated in 2010-11 by television (close to 8,100 crore), followed by print ( 6,690 crore), and below-the-line advertising at 3,758 crore. In 2010-11, online advertising is estimated to grow at 876 crore while mobile advertising will marginally increase to reach 129 crore.

Falling mobile spend (Graphic)

Mobile advertising spends have been low at 45% in fiscal 2010. In fact,this is likely to drop further to 36% in fiscal 2011. Mobile advertising stood at 65 crore in 2008-09 and saw a marginal growth of 0.5% in 2009-10 and stood at 95 crore. And while sectors such as consumer services, auto and durable goods had the maximum spend share in the mobile segment (21%), pharma spent only 1% in the space. Telecom, too, had a low spend share in the segment of just 2%.

Banks biggest spenders (Graphic)

The FMCG sector, with the largest overall ad spend of 7,910 crore at 42%, spends only 56 crore or 9%, on advertising online. It is the banking, finance and services industry which contributes the maximum (around 114 crore or 19%) to total online spends. This is followed by sectors such as consumer services which spends 108 crore in the space. IT spends 79 crore and telecom spends 70 crore in the online advertising segment, according to the report.

Using social media

It’s clearly with the need to connect with younger consumers that the report has noticed an increase of 50% in social media usage by advertisers. Facebook, YouTube and Orkut continue to be popular social media platforms for advertisers. General Motors, for instance, ended up with more than 10,000 fans on Facebook in less than six months.

Primary executions (Graphic)

Secondary executions (Graphic)

Tertiary executions (Graphic)

Tracking viewers online (Graphic)

Mrutyunjay Mishra, co-founder of Webchutney Studio Pvt. Ltd, says advertisers haven’t yet utilized the potential of the online medium in terms of advertising. While 73% of advertisers view only the click impressions (the number of times viewers click on the site), 84% don’t know how to track viewers who reach advertisements or companies through social media. Advertisers cannot think of the online medium as a substitute for traditional media. They need to look beyond just clicks, added Mishra.

Why spend on online ADs? (Graphic)

Maximum online ad spends were done to enhance website development, display and search modes. Spends on display ads accounted for 24% of overall spends. While consumer services are expected to contribute the maximum in fiscal 2011, the share of banking, financial services and insurance are likely to drop to 16% from 19% in 2009-10. Mohit Gupta, chief marketing officer of travel portal said: “Digital media has always been very important, especially since a majority of our transactions happen on the website."

Creating brand awareness (Graphic)

Online media is effective in driving traffic to a website. And while the medium barely helps in driving traffic to a store, many advertisers admit that it can create brand awareness. “Digital platform as an advertising option is evolving fast and this is where we feel it’s right to invest. We believe that the youth are opinion leaders and we would like to target them," said L.K. Gupta, chief marketing officer, LG Electronics India.

Tapping online potential (Graphic)

Online ad spends will increase by 45% in the next fiscal. At least 51% of the advertisers surveyed in the report have indicated that they will increase spends in the online segment in fiscal 2011. Gaurav Gupta, business head, utility vehicles and strategic planning, General Motors India, says: “Media and creative agencies have to sell the power and potential of the online medium. Too much of focus on return-on-investment (ROI) takes away from the true potential of the medium."

Graphic by Uttam Sharma / Mint

BFSI: banking, financial services and insurance; FMCG: fast-moving consumer goods, TG: target group; EDM: electronic direct mailers, IT/ITeS: information technology/IT-enabled services, CPC: cost per click, CTR: click through rate, CPA: cost per action, CPM: cost per impression Figures may not add up to 100% as they have been rounded off; viral ads are online ads that rely on the end user to create brand awareness by forwarding the ad via email or through social networking sites.

Source: Webchutney